This work presents an environmentally friendly, iodine-catalyzed chemical modification method to generate highly hydrophobic, optically active nanocrystalline cellulose (CNC). The high degree of ester substitution (DS = 2.18), hydrophobicity, crystalline behavior, and optical activity of the generated acetylated CNC (Ac-CNC) were quantified by TEM, FTIR, solid 13C NMR, contact angle, XRD, and POM analyses. Ac-CNC possesses substantial enhancement in thermal stability (16.8%) and forms thin films with an interlayer distance of 50-150 nm, presenting cavities suitable for entrapping nano- and microparticles. Generated Ac-CNC proved to be an effective reinforcing agent in hydrophobic polymer matrices for fabricating high performance nanocomposites. When integrated at a very low weight percentage (0.5%) in an epoxy matrix, Ac-CNC provided for a 73% increase in tensile strength and a 98% increase in modulus, demonstrating its remarkable reinforcing potential and effective stress transfer behavior. The method of modification and the unique properties of the modified CNC (hydrophobicity, crystallinity, reinforcing ability, and optical activity) render them a novel bionanomaterial for a range of multipurpose applications.